Navigant Research Blog

The lowly utility pole is getting some time in the Internet of Things (IoT) spotlight. Ameren and technology vendor Atomation are testing IoT sensors on utility poles at a site in Champaign, Illinois. The main objective is to discover how the pole-mounted sensors could help lower maintenance costs and shorten repair response times.

How Does IoT Help with Utility Poles?

The project focuses on two sensor designs, one developed by Atomation that can be nailed to the side of a wooden pole, and the other by Electric Power Research Institute (EPRI) that can be attached to the top of the pole, to cross-arms, or to lines. The idea is to give the pole a bit of a brain, so when it leans too much or topples, the sensor could send an alert along with vital information to the utility’s headend.

For instance, a downed pole could let the utility know its precise location, size, and the number of cross-arms. A repair crew could then be dispatched directly to that exact location and be prepared with the needed equipment, reducing time and eliminating the need for a second trip to fetch parts.

The Ameren project—still in its early phase—calls for the installation of 15 pilot sensors on utility poles in Champaign. Ameren officials are hopeful the trial will prove beneficial to operations, but they need clear evidence the sensors provide tangible ROI benefits before moving ahead with a broader rollout.

The Internet of Power Poles?

In Australia, network provider Meshnet is promoting a similar use case for utility poles. The startup has developed solar-powered devices that operate over a proprietary wireless network. Once installed on poles, the devices can detect tiny movements and send signals to a utility that a pole needs servicing or replacing.

The company is also considering adding temperature, humidity, wind velocity, atmospheric pressure, and rain sensors to devices installed every 2.5 km on power poles to provide more granular weather data to a system. The company has yet to announce any deals with utilities, but it claims those are close. Perhaps with enough sensors and data flowing it could help create the Internet of Power Poles.

This Use Case Is Just One Example of IoT Potential

Though both efforts are more experimental at this stage, they do point out how new and more affordable IoT technologies can reshape the value proposition for something as common as a utility pole. Sensors and communications modules are now quite cheap compared to just a few years ago. So are prices for computing power needed for analyzing all the data new IoT connections produce, especially when using a cloud service such as Amazon Web Services or Azure.

This type of experimentation also demonstrates how legacy equipment can be brought into the connected digital world to create greater business value, not just for utilities but for many other industries. This is also discussed in Navigant Research’s Industrial Internet of Things report. Sometimes the value derives not from the shiny new object, but lies instead in retrofitting the durable old one.

Saudi Arabia seems to be following Norway’s lead as a major oil producer eschewing fossil fuel generation for cleaner alternatives. This nation-state trend is mirrored at a company level, with major oil companies also seeking opportunities in renewable energy. Utilities may ignore it at their own peril.

From Oil Empire to Renewables Powerhouse

In February 2018, Saudi Arabia’s first utility-scale solar auction broke records: ACWA Power won the right to develop a 300 MW solar farm under a 25-year PPA with a tariff of $0.0234 kWh, made possible through unique market conditions. High solar irradiance and declining costs are assisted by low land costs, a favorable licensing regime, and cheap finance.

This is just part of a much wider shift to solar. In March, the Saudi government and Japanese tech giant SoftBank announced an ambitious $200 billion, 200 GW, 12-year solar generation project. If—and it is still a case of if not when—all this planned capacity is installed, Saudi Arabia’s generation capacity will exceed the country’s needs. Part of the King Salman Renewable Energy Initiative, this project could see Saudi Arabia become a net exporter of renewable power.

Saudi Arabia’s Plans Could See It Become the Norway of the Middle East

Despite obvious differences, there are many parallels to be drawn between Saudi Arabia and Norway. Both are net oil exporters, have huge sovereign wealth funds, and are keen to become the renewable energy leaders in their respective regions. Norway’s renewables strategy is somewhat more advanced than Saudi Arabia, and may point to Saudi Arabia’s future.

Rather than self-consume its North Sea reserves, Norway relies on abundant hydropower and 838 MW of wind capacity for its generation, exporting most of its hydrocarbons. With abundant oil reserves, one could expect Norway to be a nation of gas-guzzling vehicles, but the reality is very different. Through a raft of incentives, Norway has become the EV capital of the world. Navigant Research projects Norwegian EV market share could hit 33% in 2017, well ahead of its European neighbors. Finally, the Norwegian transmission systems operator Statnett is deploying interconnectors to help secure Norwegian energy supply and allow its generation companies to export excess generation capacity.

Economics and Environment See Oil-Producing Countries Turn to Renewables

There is an economic argument that underpins Norway and Saudi Arabia’s domestic energy policy: with abundant and cheap renewables, neither country relies on hydrocarbon generation, which can be exported to other countries. With further reductions in the cost of Saudi solar, the Kingdom could rapidly follow Norway’s lead. It is not difficult to imagine a future where Saudis increasingly rely on renewable generation for internal electricity consumption and drive more and more EVs.

Utilities Beware: Oil Majors Are Following Similar Paths

There are other parallels to be drawn, however. Two of the largest and cash-rich oil producing countries are making their marks in renewable energy. So are the oil majors, making increasing investments into downstream renewable energy. Which brings me back to a subject close to my heart: a distributed and renewable energy future will also be fiercely competitive. There is no room for monopoly market thinking at incumbent utilities. Oil majors and auto manufacturers are betting heavily on an electrified, distributed, and renewable future. There may be no room at the table for old-school utilities fixed on a centralized business model.

More than a decade after the earliest models of smart electric meters were deployed, the market for advanced metering infrastructure (AMI) is undergoing a major shift. Utilities have historically preferred to acquire their own physical assets and any software required to manage these assets, store all related data in house, and use their own staff to perform related business processes.

However, numerous utilities do not have capital to finance a full-scale deployment or lack the internal skills or IT infrastructure necessary to support smart meters. With utility revenues flattening around the globe, these financial concerns are only increasing. Some of these utilities—particularly smaller companies—are now looking to service-based delivery models to implement smart metering.

Market Landscape

Utilities are increasingly turning to these flexible deployment models to help them mitigate technology risks and reduce costs. In North America, Wisconsin Public Service and the City of Roseville, California recently contracted with Landis+Gyr and Itron, respectively, to manage various aspects of their AMI deployments. Internationally, energy retailers like Solarplicity (UK) and Trustpower (New Zealand) are demonstrating the demand for as a service solutions in deregulated markets.

Regarding these service-based delivery models, there are a number of potential configurations, including:

Data services: The collection, storage, and analysis of data in the cloud.

Cloud-based software: The delivery of software as a service or enterprise-hosted software.

Fully managed services: The delivery of physical assets and business processes as a fully managed service.

While the assets (meters) themselves will largely remain within the utility domain, there are a number of AMI operations being outsourced to third parties, including:

Growth Enables Growth

Looking forward, the market for service-based delivery models will remain strong. This comes in part from three market growth considerations: new smart meter growth, replacement smart meter growth, and growth from emerging markets:

New: Navigant Research expects the smart meter market to remain strong and grow over the next decade, with global penetration expected to climb from approximately 39% at the end of 2018 to 57% by the end of 2027. These new deployments will facilitate higher levels of spending around smart meter communications and management; this leaves considerable upside in the market for service-based delivery models.

Replacement: The market for smart meters as a service is not just limited to new deployments. The earliest smart meter deployments will soon enter their first replacement cycle, as seen in Italy and Sweden. After a decade of direct ownership, some utilities are looking to the as a service model as a way to flexibly introduce new technology (e.g., the migration from an owned radio mesh network to public cellular).

Emerging Markets: In the US, most major investor-owned utilities and cooperatives have or are in the process of rolling out smart meters. This leaves an untapped market of primarily smaller public utilities, which to date have shown a propensity to adopt service-based delivery models for the ongoing management of those new meters. Emerging markets, including Eastern Europe, Asia Pacific, Latin America, and the Middle East & Africa, will account for the majority of new project growth; utilities in these markets are more likely to lack the requisite human and financial capital to deploy and manage their own smart metering network.

Considering the Future

When considering these market drivers, it should be noted that vendors are also paying attention and adjusting their product strategies to this changing business landscape. Perceptions and demand for these service models have changed at a pace that is truly astounding. While not the norm quite yet, the future of service-based delivery models is bright.

Despite the uncertainty created by the Sun Tax in Spain, the industry is growing again. According to the Spanish PV Union (UNEF), in 2017, the annual installed capacity increased by 145% thanks to new self-consumption facilities, growing from 55 MW in 2016 to 135 MW in 2017. This development has been driven by the high degree of competitiveness achieved by PV, the costs of which have reduced significantly in recent years.

Off-Grid DER Is Booming

Most of the growth in 2017 came from agricultural use and rural electrification. In most of these installations, distributed energy resources (DER) has an advantage as it competes with either high fuel costs in applications like water pumping that used diesel generators or, in the case of new rural facilities, with expensive grid expansion costs.

In this sector, the challenge now is to not to reduce the price, but to convince potential customers of the value DER installations can bring. For example, farming operations can reduce diesel consumption to power irrigation pumps by around 70% with the addition of a solar plus storage system, this type of installations have a payback of just a couple of years.

Commercial and Industrial Is Becoming Competitive

The introduction of variable demand charge on auto-consumption (the so-called Sun Tax) in Spain created the impression that distributed solar was doomed to fail as with this charge, installation would be too costly to operate. This impression has lingered although, with the lower cost of solar installations, a significant number of installations could be paid back in 5-7 years despite the variable demand charge payment. The local systems integrator Opengy, reported that 2017 was its best year since 2010, with around 18 MW in its project pipeline (compared to less than 10 MW in 2016 and 2015).

Residential Gaining Momentum

The residential market is also gaining momentum, although it is yet get significant numbers of installation in place. In the latest news from this segment, the challenger local energy supplier, Viesgo, announced in February 2018 a partnership with (the also challenger) Bigbank, to finance Viesgo’s customers that want to buy a DER system (that can include solar, storage, and even EVs). In this agreement, Bigbank offers a 6.95% credit to Viesgo customers, while Viesgo is in charge of installing and servicing the system and collect customer payments. This follows the news of sonnen and SOLARWATT, the German battery and shared energy platform providers, which both entered the market in the last 6 months.

In the Global DER Deployment Forecast Database report, Navigant Research analyses the global market for DER technologies and assesses key market and technology trends. Driven by these trends, Navigant Research estimates that Europe installed 29.1 GW of new DER capacity in 2017, generating $25.5 billion in revenue. Spain missed the mark of what DER can bring to a country, but the future looks sunnier.

While Spain is far from the leading DER market and local legislation is not especially welcoming to DER, the demand charge could be improved and the lack of a flexibility market limits the revenue streams DER could tap into. The country is finally waking up from its distributed generation nap and a combination of a better economy and better system economics are behind it. The utility-scale record low bids in last years’ tenders put renewables back in the front pages, this time with a positive note and word-of-mouth marketing about savings at the distributed level are creating a buzz. Once these trends consolidate, Spain could become the first European country to have a successful DER industry that does not rely on any type of incentive (direct or indirect) to thrive.